Thank You

Error.

They know it's not ideal — she spends too much, she makes too little, and she doesn't offer a lot of love in return — but investors in 2013 won't resist the siren song of the U.S. Treasury.

Those bonds saddled with slow growth, shaky fiscal moorings, and worries of inflation are just too irresistible. Investors playing the field for something better, with the same safe and liquid qualities, will find none can compare.

And with the U.S. economy teetering at the fiscal cliff, a still-sorry state of affairs in the euro zone, and once go-go emerging markets hitting air pockets on their ascent to the big leagues, 2013 will once again find U.S. government debt with a line of suitors.

The benchmark 10-year Treasury rallied in 2012. It yielded 1.708% Friday, down from 1.88% at the end of 2011. A falling yield means a rising price; bond prices move inversely to yields.

If you're dating the Treasury, the Federal Reserve is a kind chaperone: The central bank is pressing forward with its asset-purchase program to push down long-term interest rates to goose the economy. With the Fed pledging to keep its key rate at zero until unemployment falls to 6.5%, as long as inflation projections don't peak above 2.5%, perhaps those warning of out-of-control inflation sparking a spike in yields are just fuddy-duddies who won't let you and your Treasury get too close at the dance.

"Does QE pose an inflation risk in 2013?" ask economists in the research group at DBS Bank in Singapore, referring to the Fed's asset-purchase program known as quantitative easing. "No. Only when growth accelerates will inflation follow. Remember: QE continues because QE doesn't work — on growth or inflation."

Most economists forecast only muddle-through levels of U.S. growth in 2013 — and that's without factoring in any effects of going off the much-ballyhooed fiscal cliff, which would trigger across-the-board tax increases and drastic cuts in federal spending.

Even if lawmakers offer the U.S. economy a parachute to avert the cliff, the U.S. debt ceiling is likely to again come into play around February or March, say David Ader and Ian Lyngen at CRT Capital Group in Stamford, Conn. A "can-kicking" solution to the fiscal cliff "may provide a boost for risk assets to the detriment of Treasuries, but we'd expect any such move to be transitory at best," they say, as the debt ceiling looms.

With that uncertainty, and the still-struggling global economy, the consensus call among 21 Treasury primary-dealer banks is for the 10-year yield to end 2013 at 2.25%, according to a recent Dow Jones survey. That would be a modest rise in yield from the maturity's record low of 1.38% notched in July, but still depressed by historical standards. The 30-year bond yielded 2.884% on Friday, about even with the 2.89% it yielded at the end of 2011.

The new year will bring the "old conundrum" of plenty of central bank-provided liquidity, "economic uncertainty and high investor sensitivity to market volatility," says Lena Komileva at G+ Economics in London. "A bumpy 2013" means the old risk-on, risk-off cycle will continue, she says.

Without a clear shift in sentiment to a rosier picture, the perceived safety of the U.S. Treasury will beckon. Even if the U.S. faces another downgrade, as it did the last time lawmakers wrangled over the debt ceiling, Treasuries should shine. After all, where else will hordes of skittish investors go?

Still, Pimco's Bill Gross, the Bond King of the Newport Beach, Calif., money manager, attempts to tear the petals off the Treasury rose, warning of value-diluting inflation: "Hopefully your investment stocking is filled with inflation-protection assets," he says.

The DBS Bank team discounts those concerns: "Worries persist" that the Fed's asset purchases "will ultimately lead to high inflation and that once the 'genie's out of the bottle,' it's nigh impossible to get her back in," they say. "She certainly hasn't escaped yet."

BRADLEY DAVIS is a news editor for DJ FX Trader, a service of Dow Jones and The Wall Street Journal.